Corporate earnings show a surge in liquidity... followed by rising prices

The rapid increase in money supply, driven by higher corporate earnings, has led to rising inflation, according to the Bank of Korea's June report on currency and liquidity. M2, a broad measure of money supply, grew by 0.7% month-on-month to 4,213 trillion won, the largest increase since February 2023. This surge in money supply is primarily attributed to expanded liquidity in the money market funds and two-year or less regular deposits by large corporations, especially those involved in the semiconductor industry, which is experiencing robust export performance.

While corporate and non-profit sectors saw a decrease in money supply, indicating a shift in personal funds towards stock investments, the overall increase in money supply continues to contribute to inflationary pressures.